Greens leader Bob Brown has called for proceeds from the Government’s mining tax be used to deliver a 5% reduction in the company tax rate for SMEs to 25%, although it’s unclear whether the policy would apply to partnerships and sole traders.
Brown’s comments came as the Government released its exposure draft for the minerals resource rent tax, which is expected to raise $11 billion over three years by putting a 22.5% levy on coal and iron ore from July next year.
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The money raised from the tax, which was watered down from original plans for an effective 40% rate, are earmarked for a 1% cut in the company tax rate to 29%, an increase in superannuation contributions and infrastructure spending.
It’s believed under the Greens’ plans, small business would refer to companies with revenue of up $2 million per year and funded by not proving the 1% tax cut for large companies.
While the Tasmanian Small Business Council has thrown its support behind the concept of lower company tax rates for small business, its chief executive Robert Mallett questioned what would happen to sole traders and partnerships, which account for about two-thirds of the sector.
According to its TSBC chief executive Robert Mallett, a reduction in the company tax rate to 25% is not the most pressing issue for small business.
“We need to find a way that all three entities [sole traders, partnerships and incorporated organisations] in one shape or form are treated equally.”
Peter Strong, executive director of the Council of Small Business of Australia, is supportive of the proposal but agrees that all entities need to be included.
Strong, who has met with Brown recently, said he couldn’t knock the idea, but getting the process right is crucial.
“The fact he came out with it is great; he sees the huge compliance costs on us.”
“I’ve been looking at it myself: how do we get the equity back between big and small? One way is through the tax system. It’s not creating protection and unfairness; it’s about removing the unfairness.”
“And the other is removing red tape, such as paid parental leave and superannuation payments.”
Describing small business as the “incubator of innovation”, Brown said yesterday that cutting the company tax rate for SMEs to 25% would “keep billions of dollars in Australia which might otherwise go as profits offshore.”
“The revenue from the mining tax should be re-focused on tax relief for business,” Brown said.
“About half of the workforce is employed by small businesses, compared to 2% in the mining industry, which is the major beneficiary of the Government’s proposed corporate tax cut.”
“Keeping the tax rate at 30% for large companies will mean around $2 billion available to be targeted to assisting the small business sector which has a higher compliance burden and less political power than the big end of town.”
Consultation on the mineral resources rent tax is set to continue until October 5.
The Greens will take their proposal to the tax forum, to be held early next month.